Sheldon,Inc.declared a stock dividend of 50,000 shares on a date when the company's common stock was selling for $18 per share.Prior to this date,Sheldon had 500,000 outstanding shares of $1 par value common stock.As a result of this stock dividend,Sheldon's common stock will ________,the additional paid-in-capital will ________,and the retained earnings will ________.

Question

Quizplus · Accepted Answer

The stock dividend increases common stock by the par value of the new shares ($1 x 50,000 = $50,000), increases additional paid-in capital by the excess of market value over par value ($17 x 50,000 = $850,000), and decreases retained earnings by the total market value of the new shares ($18 x 50,000 = $900,000).